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Companies release new details on pipeline

Published on NewsOK
Modified: February 15, 2013 at 6:36 pm •
Published: February 15, 2013

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JUNEAU, Alaska (AP) — The companies pursuing a major natural gas project in Alaska released new details of the effort Friday, satisfying the first in a new series of benchmarks laid out by Gov. Sean Parnell.

"So the good news today, and it's very good news, it's the first time in our state's natural gas history that the companies who can build, fill and operate a large diameter pipeline have together selected a pipeline concept," he told a group in Fairbanks.

Parnell, in his State of the State address last month, said he wanted to know by Friday details including the size of the pipe, daily volume of gas, updates on the gas treatment and liquefaction plants and the number of off-take points to allow for gas to be used in-state, for Alaskans energy needs.

Exxon Mobil Production Co., BP Alaska, ConocoPhillips Alaska and TransCanada Corp., responded to each request in a letter to Parnell. They said they were looking at a 42-inch diameter pipeline that would carry up to 3½ billion cubic feet of gas a day and would have five off-takes along the route.

The gas treatment plant would be on the North Slope, and the footprint of the liquefaction plant would be 400 to 600 acres. There was no word on where the terminus might be.

Parnell last year set an initial round of benchmarks aimed at jolting alive the seemingly stalled project. The North Slope's three major players — Exxon Mobil, BP and ConocoPhillips — and TransCanada agreed to pursue a liquefied natural gas project that would be capable of overseas exports, and in October released some details along with a timeline for work and decision-making on what a project that could cost more than $65 billion.

In their letter, the companies reiterated their desire for a "competitive, predictable and durable oil and gas fiscal environment." They said that "will be required for a project of this unprecedented scale, complexity and cost, to compete in global energy markets."

That is one of the issues the companies have said they want addressed by the end of the next phase, which would include preliminary engineering and a financing plan.

Parnell's next benchmarks are for the companies to finalize an agreement to move into that next stage by spring and to have a full summer of field work. Once those are met, "the project will finally move at the speed that Alaskans demand and our future requires," he told the Fairbanks group.

Alaskans have long hoped for a gas line as a way to create jobs, provide more reliable energy and shore up revenues as oil production declines. Given the history, Parnell said in an interview that he understands people might "cast a bit of a skeptical eye" when hearing about progress on a line that has yet to transpire.

"But at this point, they (the companies) have done everything I've asked when it comes to moving the project forward, meeting the benchmarks. I think Alaskans should be encouraged in that," he said.

"Alaskans are frustrated and eagerly looking for more specifics. I know I sound like a politician when I say it's going to take time, but it's going to take time," he said.

Persily said he doesn't think the companies will fully commit to the project until there is a tax structure in place for natural gas in the state that works for a project of this size.

Parnell has proposed an overhaul of the Alaska's oil tax structure, as a way of making Alaska more competitive and encouraging new production. The plan has gotten a lukewarm response from some lawmakers, but legislative leaders share his goal of boosting oil production and are studying changes to the system.

Given that it is a shared priority, "I don't expect legislators will go home (this session) without doing something to increase production of Alaskans' oil for Alaskans," he said.

Last year, Parnell said that if the companies met his first round of benchmarks, the 2013 Legislature could take up gas tax legislation designed to move the project forward. Those benchmarks were met.

Parnell said he doesn't think an overall fiscal package will be worked out this year unless the companies are ready to make a final investment decision on the project. But he said there are things that might be addressed short of that, and that he has told the companies that Alaska is willing to take "commensurate, proportionate" steps with them to get a gas line done.